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Released: May 14, 2010
Economy Tops List of Concerns at NASSTRAC Conference
What’s the latest buzz in the transportation industry? It’s all about the economy. At least that’s the general consensus from hundreds of transportation executives with manufacturing companies, retailers, distributors, 3PLs, and carriers of all modes who attended the NASSTRAC Logistics Conference in Orlando April 25-28.
“As far as the economy goes, we’re seeing movement in the right direction, but we still have a long way to go,” said Jon Langenfeld of Robert W. Baird & Co. Along with Langenfeld, John Larkin of Stifel Nicolaus Transportation Equity Research also gave his assessment of the economy.
The good news? Langenfeld gave attendees reassurance that the freight recession is over and, in the near-term we are very positive on the freight economy. The economy is stronger than people expected, and inventory restocking has just begun and could be longer and stronger than anticipated. However, there’s a capacity crisis on the horizon and freight rates continue to deteriorate. He said that truckload capacity has rationalized with rates and returns, but LTL capacity has been much more static with the pricing outlook much less clear. Rates have stopped declining but there’s still too much capacity.
In addition, spot truck demand was scarce in 2009 so supply was abundant, but now there’s a capacity crisis emerging. Another challenge is that we now have the oldest truck fleet in a generation. There’s no incentive for fleet reinvestment, as the returns are terrible, balance sheets are weak, and capital to reinvest is not readily available.
Larkin summarized the freight economy quite well: freight has bottomed and freight demand has bullish signs. He cited dry van miles in February as 8.5 percent above the absolute bottom and LTL tonnage as .4 percent above absolute bottom. But at least we’re trending in the right direction.
Top Motor Carrier Executives Give Concern About Unwise Legislation
Motor carriers echoed the sentiment that the economy is improving. However, “we’re in for a slow recovery” warned three top executives who participated on a panel discussion: Michael Smid, president of YRC Inc. and COO of YRC Worldwide, Bill Logue, president and CEO of FedEx Freight, and Wes Kemp, president of ABF Freight System. All three also cited that while the economy is a threat to transportation, unwise or excessively burdensome regulation is a close second.
“We need to pay attention,” said Smid. “There is a certain amount of anti-truck rhetoric out there right now. We do need to consider balance, but it can shift emphasis and funds away from highways.” In fact, several concerns were expressed at NASSTRAC about recent statements made by the U.S. Department of Transportation suggesting that freight rail and marine highways should replace trucks as the primary mode of freight movement. While the trucking industry has long recognized the importance of intermodal transportation, it’s the belief of many that statements exaggerating the possibility of a widespread shift of freight off trucks are factually incorrect and can breed irresponsible policy. NASSTRAC certainly supports the intelligent use of multimodal transportation alternatives to reduce emissions, reliance on imported oil, and congestion. However, decision-makers in Washington and elsewhere are mistaken if they think motor, rail, water and air carriers are interchangeable, and that restructuring the nation’s transportation system to serve non-transportation goals can be accomplished without increased costs, decreased efficiency or economic disruption.
Other legislative concerns that shippers and carriers alike need to keep a close eye on:
- Safety that include drug and alcohol testing clearinghouse (S. 1113), HazMat reauthorization (H.R. 4016), employer notification, safety equipment incentives (H.R. 2024 and S. 1582), and distracted driving (S. 1536 and S. 1938).
- Labor, including truck driver hours of service, card check (H.R. 1409 and S. 560), and independent contractor (H.R. 3408 and S. 2882).
- Taxes potentially on fuel, vehicle mile tax, and carbon tax.
- Infrastructure investments and progress needed to be made in this area.
Click here to view NASSTRAC’s Recently Released Position Papers on these issues and more.
Senators Propose Emissions Reduction Bill
Two senators unveiled a long-awaited carbon emissions reductions bill May 13 that could spur increases in the cost of diesel fuel for motor carriers. The American Power Act, introduced by Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.), calls for limitations on carbon emissions for mostly large stationary sources, but gives the U.S. Environmental Protection Agency authority to regulate greenhouse gas emissions in the transportation sector. Many in the industry oppose the bill, which it said would raise the cost of gasoline and diesel fuel without significantly reducing the output of carbon dioxide by the trucking industry.
One opponent, Bill Graves of the American Trucking Associations, stated: “While others might object to our characterization, the climate bill clearly imposes a tax on transportation fuels and reallocates revenue from that tax for non-transportation purposes.” Only a small portion of the tax would go to the Highway Trust Fund for much-needed improvements and repairs to our nation’s highway infrastructure, he said. The bill would for the first time require carbon reductions of the major carbon emitting sectors in the U.S. including coal-fired power plants, electricity production, heavy industry, and transportation.
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